Like most companies in today’s booming economy, Red Hat is growing. As an enterprise technology company, IT plays a lead role in that story. What’s different for Red Hat IT compared to most IT departments is their performance doesn’t just impact their internal customers but can be influential with Red Hat’s customers as well.
“For Red Hat as a company, our mission statement is to be the default choice for what we call Next Generation IT,” said Mike Kelly, Red Hat’s CIO. “So we want to lead the way for Red Hat so that we serve as an example of how innovative and growing companies operate.
“As we take that message to market and ask customers to think differently about how they’re going to transform their own companies digitally, we, in IT, want to follow that strategy and be the example for how that could look. And a huge part of that is for us to move to a new operating model. We’re leveraging TBM for that.”
To prove the value of its products compared to the competition, Red Hat IT uses TBM to capture the cost of using its own products internally, and via TBM taxonomy standards, benchmark those costs against competitive products. That benchmarking creates powerful, data-driven value stories that can be used by Red Hat sales teams to drive customer conversations and close sales.
What TBM-enabled Next-Gen IT looks like in action
Red Hat defines Next-Gen IT this way: “As next-generation IT, we endeavor to drive business innovation through technology using industry best practices and lead the way in defining and adopting new approaches that allow us to execute in an optimal way.”
Because of the cost transparency and value conversations, it enables with the business, TBM is critical to this strategic focus. This framework, coupled with Apptio solutions, provides Red Hat IT the visibility and spending granularity it needs to make informed, business-focused decisions around capacity planning, project management, and IT service management, as well as the benchmarking capability to measure the business value of its products against competitors. It also allows the team to shift IT spend conversations with the business from cost to value.
“We fancy ourselves as innovative,” said Kelly, “but, in order to be innovative, you’ve also got to be operationally excellent. You’ve got to be brilliant at the basics of what you do. We have to have trust. We have to have transparency. And so, as we plotted our course for our own digital transformation for IT, the fundamental building block of that was about getting TBM in place so that we had a strong underpinning for how we run, grow, and transform the operation.”
In order to be innovative, you’ve also got to be operationally excellent. You’ve got to be brilliant at the basics of what you do.
CIO, Red Hat
A key component of this strategy is becoming more service-oriented. Since the introduction of TBM and the TBM taxonomy in early 2017, IT’s efforts to accomplish this goal are far more effective. Previously, even defining a core set of services was hampered by the inability to shift the discussion inside of IT away from how they delivered technology to the business capabilities that technology delivered—in a language the business would understand. Without TBM, it took IT over 18 months to define their first set of services. Post-TBM, they completed this work, including redefining the original set of service definitions to match the TBM taxonomy, in just two months.
Red Hat IT is also leaning on TBM to help create their first-ever comprehensive portfolio of IT projects. By applying the taxonomy to the project portfolio, they were able to map projects not only to a strategic business or IT objective but to the underlying services and applications that support it. This opened the door to a number of benefits, from making the business more agile to improving project cost management to better relations with the business.
“TBM implementation has really influenced some of the overarching things we’re trying to achieve as an organization,” said Stephanie Welsh, Red Hat’s Senior Director of IT Strategy and Enablement. “When we talk about our service management initiatives and our portfolio of project management initiatives, TBM has been a great baseline for us to fast-track some of the work that our teams are doing.
“Because we’re building off of a common understanding of cost pools and towers and services, we can have robust conversations about how something is showing up in our portfolio, the impact of the services associated with it, and the value and cost resources allocation associated with that particular activity or initiative.”
Prior to TBM, Red Hat had no uniform way of collecting and reporting data that explained how much money was going to change-the-business activities like new product development. This resulted in too much of IT’s spending being classified as run-the-business, masking IT’s real value to the business. After TBM, this misallocation became obvious. So now, while IT is still doing the same type of value-add development work, they’re finally getting credit for it.
Enabling Agile development with TBM
This increased visibility is having a very positive impact on the Agile development environment at Red Hat, a key component of Next-Gen IT, allowing Kelly to prioritize the time and effort of his development teams.
“TBM allows us to have conversations with the business partners who drive the feature set. We can say, ‘Okay, if you get this far, this is what that’s going to mean either from a resourcing or a cost perspective.’ We can also talk about the levers we can pull, but also the importance of the specific features, given the resource,” said Kelly. “And that feeds back into our portfolio and our overall prioritization. That’s been really valuable for us from an Agile perspective.”
Making cloud work
Another component of Next Gen IT involves embracing a hybrid cloud strategy. Just as they do for internal operations, TBM and Apptio give the infrastructure and operations team the visibility into spend they need to make informed decisions about where to run a workload. And it’s not always about cost. Some workloads are just better suited to a public cloud environment— especially ones that are needed to support unplanned projects that show up on IT’s doorstep unannounced.
“What I’m able to do is point back to the business unit requesting the work and show them what they’re actually consuming and help them understand what it means to scale this and roll it out in a much more elastic way across a hybrid cloud platform,” said Matt Lyteson, Senior Director, Digital Solutions Delivery. “Without the TBM tooling that we rolled out, we would not be able to do that.
“Without the traceability and transparency TBM provides, it’s sort of like you’re building stuff without knowing if it actually contributes business value or not. Transparency is enabling us to increase performance, resiliency, and availability, at the same time that we’re optimizing cost.”
Without the traceability and transparency TBM provides, it’s sort of like you’re building stuff without knowing if it actually contributes business value or not.
Senior Director, Digital Solutions Delivery, Red Hat
TBM-enabled rolling forecasts improve IT and business agility
Another important factor in Red Hat IT’s goal of becoming operationally excellent is better planning. TBM and Apptio are enabling IT to move from annual budgeting to rolling forecasts. Every month service and cost center owners can compare actual spending numbers to forecasts, allowing them to manage their variances in near real-time. This allows them to move budget around to meet new, unanticipated demands. This is particularly important in the tech business, where agility and speed-to-market keep top-tier companies like Red Hat successful.
“Prior to TBM, our typical monthly engagement between IT and finance was much more of a look back,” said Kristine O’Shea, VP, Global Finance. “It was our actuals versus our budget. We were very reactive versus being proactive. Since TBM, we’ve been able to have much more strategic, forward-looking conversations and put some ownership back into the cost center owners hands; to think more strategically about how we plan, how we forecast, and how we truly understand their IT needs.”
This has been so effective that they are already planning for the fiscal year 2020’s IT budget —even though the fiscal year does not begin until March of 2019, said Welsh. “We’re starting to have that conversation today because we’re able to see, from the rolling forecast perspective, what the downstream impacts are from decisions we’re making today,” O’Shea said. “And that’s really a shift for us. We haven’t done that in years past.”
This increased visibility also is improving business agility by moving funding from the run-the-business side of the ledger to the change-the-business side. This includes negotiating with vendors to create contracts that are better aligned with the company’s overall strategic objectives and future needs and making better personnel decisions. In an industry best known for skills shortages, better IT planning is leading to more informed discussions around what types of people and skills IT needs to move the company in the direction it wants to go versus just back-filling vacancies with the same jobs and titles as before.
“At the end of the day, it’s allowing us to make decisions that are best for IT as a whole, instead of just best for an individual department,” said Welsh. “That is really powerful.”
Changing the conversation and building trust
The common theme running through all of these efforts is transparency. Without the ability to see where spending is happening and who benefits and who doesn’t, it is impossible to change the conversation from technology costs to business value. Once this bridge is crossed, however, the relationship between IT and the business is transformed. This was the case at Red Hat. No longer is IT seen as just another budget line item or a cost center to manage—it is now a partner moving the business forward.
“In years past, it’s been a much more at arm’s length relationship with our business partners,” said Welsh. “This year, with TBM and Apptio, we’ve seen a real shift away from that. Folks understand the spend that we have in IT, and how we’re using our dollars to make effective and useful decisions. That’s based on a sense of trust and transparency that we’ve built out with senior leadership, all the way down to some of the individual business partners that we work with on a daily basis.
“That has been a real game changer for us.”